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Why free trade talks with China failed

Prime Minister Justin Trudeau meets Chinese President Xi Jinping in Beijing on Dec. 5, 2017. Photo by The Canadian Press

When Prime Minister Justin Trudeau jetted off to Beijing, the media was told to expect the announcement of a free trade agreement, the first of its kind between China and a G7 country.

The first sign that something was amiss was on Monday morning, when Trudeau’s meeting with China’s second-in-command ran late. Then, a planned press conference was hastily scrapped. Instead, Trudeau and the Chinese premier read prepared statements restating their commitment to “exploratory” trade talks.

Without the widely-hyped free trade announcement in hand, any remaining deliverables from Trudeau’s trip to China seem minor in comparison. But Yves Tiberghien, associate professor of political science at UBC and director emeritus of its Institute of Asian Research, cautions that Canada’s global trade position is undergoing unprecedented change. "Canada is trying to do two things at the same time, and we have to be careful," he said in an interview with National Observer. "The first goal is to diversify our trade footprint. Right now, our trade position is dependent on NAFTA, and that’s not the best place to be with Donald Trump. Nailing down free trade agreements with other significant partners, that is a priority of the very highest order.”

The second goal is to advance the “progressive trade agenda” -- free trade with specific provisions protecting women, workers, indigenous groups, and the environment. Last month, at a meeting of Trans-Pacific Partnership nations in Vietnam, Trudeau refused compromise and no-showed the planned signing ceremony.

It was a move that drew universal condemnation from the global press. “The Canadians screwed everybody,” huffed the Australian delegation. Trudeau “threw a spanner into the talks,” complained the Singaporeans. Japanese officials are still “fuming from the Trump-like no-show in Vietnam,” Tiberghien said. “They’ve even started pushing for a ‘TPP-10’ without Canada.”

Going forward, Trudeau’s challenge is to advance his signature values-based trade agenda without stalling the process of putting pen to paper on a trade deal.

“If we push this literally, in a very in-your-face kind of way, it may threaten diversification, the primary goal” Tiberghien said, citing the TPP fiasco. “But there is room for compromise here, particularly on labour, indigenous rights, and gender. Wages have increased 10 to 20 percent a year. On gender, China’s general trade position is not to take it into account, but they are trying to do something domestically here, too.”

Canada’s domestic politics complicate Trudeau’s task. According to the government’s consultation report, Canadian businesses remain suspicious of China’s dispute resolution system, uneven market access, and human rights abuses. Any free trade agreement would also greatly increase both Canada’s merchandise and service trade deficits with China: in 2015, more than 60% of Canada’s $45.5 billion bilateral trade deficit was made up of electronics and machinery. Despite our resource-based economy, Canada continues to import Chinese metals, mine, and energy products.

In recent years, powered by the growing Chinese tourism industry, Canada has posted modest surpluses in its bilateral services trade.

Repackaging stale deals and selling them is new a staple of foreign trip communications. In a Beijing event that was well-received by Chinese state media, Trudeau highlighted the 2018 China-Canada Year of Tourism, a program which was announced two years ago. The “exploratory talks” both sides recommitted to had started in 2016, when Chinese Premier Li Keqiang visited Ottawa.

“At the end of the day, it is pretty unusual to have the PM to travel for minor agreements,” Tiberghien said. “Usually, you would send a minister. But there is also an agreement on climate change, full of interesting points and potential cooperation.”

With Trudeau back in Canada, Tiberghien says that the success or failure of his trip can only be measured when the other parts of Canada’s trade strategy pan out.

“If, in the long term, Canada and China start free trade negotiations and the deal is of higher quality, everybody will forget the fact that there was a delay,” Tiberghien said. “It is striking, though, that in a single month, China is delayed, NAFTA is deadlocked, and Canada nearly stalled the TPP. In Asia, a country the size of Canada can’t afford to play last-minute hardball. You have to follow due process. One Trump is enough.”